Ocwen Loses Bid for Early Test of CFPB’s Constitutionality

By Chris Bruce

A federal judge June 2 blocked Ocwen Financial Corp.’s bid to test the constitutionality of the Consumer Financial Protection Bureau in the early stage of a closely watched enforcement case ( Cons. Fin. Protection Bureau v. Ocwen Fin. Corp. , S.D. Fla., 17-cv-80495, 6/2/17 ).

The ruling by Judge Kenneth Marra of the U.S. District Court for the Southern District of Florida allows the CFPB to proceed unimpeded with its April lawsuit alleging that Ocwen violated consumer protection laws in servicing loans of distressed borrowers.

Ocwen sought an early case conference on the constitutional question, saying it should be settled before allowing the CFPB to go further. Marra disagreed, saying that would depart from settled procedural rules and might delay the case. He said Ocwen may still make its constitutional attack on a motion to dismiss.

Marra also declined Ocwen’s request to seek U.S. Attorney General Jeff Sessions’ views on the CFPB’s constitutionality. In a separate order June 2, Marra said it’s “premature” to invite the Attorney General’s views at this point.

Marra said he can weigh that request again in the context of an Ocwen motion to dismiss. “Until a motion is filed setting forth the exact basis for the challenge, the Attorney General will not have sufficient information to determine whether he should intervene,” Marra said.

Ocwen: Case Unjustified

“We have reviewed the order, which addresses how the Court would like to have the constitutional attack presented to it,” Ocwen spokesperson John Lovallo said in an email to Bloomberg BNA. “We look forward to including that argument with all of the other reasons CFPB’s suit is unjustified and should be dismissed.”

Marra’s June 2 orders, especially his decision not to fast-track the constitutional issue, could help the CFPB in other litigation. In April, when Ocwen sought the case conference shortly after the CFPB filed its lawsuit, attorneys said Ocwen’s effort, if successful, might encourage other defendants in CFPB cases to make similar requests. Marra’s rulings give the CFPB more ammunition to fight any copycat moves.

The CFPB’s constitutional status is now being actively weighed by two federal appeals courts. The U.S. Court of Appeals for the District of Columbia Circuit’s full bench May 24 heard argument in a case involving PHH Corp. of Mount Laurel, N.J. Several observers who attended the argument say they expect that court to rule for the CFPB, perhaps setting up the case for consideration by the U.S. Supreme Court.

Meanwhile, the Ninth Circuit May 17 gave Burbank, Calif.-based D&D Marketing the go-ahead to challenge the CFPB’s constitutional status in an appeal from an enforcement lawsuit by the agency.

Ocwen is fighting a separate but related lawsuit filed the same day as the CFPB’s action. The suit by Florida Attorney General Pam Bondi (R), which also is being heard by Marra, similarly faults Ocwen’s servicing practices.

Ocwen is represented by Thomas M. Hefferon and Sabrina M. Rose-Smith of Goodwin Procter in Washington, and Bridget Ann Berry of Greenberg Traurig in West Palm Beach, Fla.

The CFPB is represented by Jean Marie Healey, Atur Ravi Desai, and Jan Edwards Singelmann.

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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